What is GAAR ?

It will now come into effect from April 1, 2017 (Assessment Year 2018-19).

It contains provision allowing the government to prospectively tax overseas deals involving local assets.

There have been fears that the government may use it to target P-Notes.

Through the use of GAAR, government may try to tax P-Notes as indirect investments, which could attract a tax rate of up to 15 per cent, experts say.

To avoid tax altogether under GAAR, an investor may have to prove that P-Notes were not set up specifically to avoid paying taxes.

Earlier,Finance Minister Arun Jaitley had in his Budget speech in 2015, deferred GAAR implementation by two years and also the investments made up to March 31, 2017 shall not be subjected to GAAR, which was to be applied on those claiming tax benefit of over Rs. 3 crore.